Barbados Canada Tax Treaty Update

Barbados and Canada have updated their longstanding tax treaty.  The original Barbados Canada tax treaty has been in place since 1980.  It is a very important tax treaty for both countries with Barbados being the leading international business jurisdiction for Canadian foreign direct investment.

The Barbados Canada Double Taxation Agreement (DTA) was amended to ensure that it continues to meet modern standards on transparency and tax information exchange between the two countries.  The updated Protocol will ensure that the tax agreement meets all requirements and standards in accordance with the Organization for Economic Co-operation and Development (OECD).  In recent years, the OECD has been updating their standards to enhance tax information exchange and leading offshore jurisdictions like Barbados continue to expand and update treaties to remain in good standing.

The updated Protocol was signed in the Barbados Parliament on November 8, 2011 by Barbados Minister of International Business and International Transport, Hon. George Hutson along with the Canadian High Commissioner to Barbados, Ruth Archibald.

At the signing, the Barbadian Minister announced that “The signing of this protocol will improve the treaty-based mechanism for tax information exchange to the level of the standard on transparency and exchange of information.  Undoubtedly, this Protocol demonstrates our commitment to internationally accepted principles of transparency and tax information exchange to which we have agreed, and in which we have had several years of practical application.”  In addition, he added that the tax treaty makes Barbados “an attractive jurisdiction for Canadian investors who wish to enhance their global competitiveness.”

The Canadian High Commissioner to Barbados added that the Protocol “modernizes the existing agreement to be in conformity with the OECD standard for the effective exchange of tax information.”

Barbados Canada Tax Treaty Benefits

The Barbados Canada tax treaty is one of the most important for the international business sector on the island as it serves to encourage Canadian companies to base their international operations in the jurisdiction.  The island’s business structures and low tax rates benefit Canadian international expansion by reducing taxes paid, allowing for rapid growth.  Barbados tax rates on International Business Companies are 2.5% down to 1%.  In addition, there are no withholding taxes on interest, royalties, dividends or management fees paid to the Canadian company.

Double Taxation Agreements encourage foreign investment between countries by eliminating double taxation which may cause the same company’s profits to be taxed twice – once by each country.  This improved facilitation and agreement on the treatment of profits between partner countries allows businesses to have a clear set of rules and guidelines in which to operate.

It is good news that Barbados and Canada have chosen to update this important tax treaty to stay abreast with international business best practices and remain at the forefront of transparency and tax information exchange requirements in the offshore business sector.

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